In a sharp decline from last year's consensus, a Chinese investment bank says refined oil demand will rise only 0.3% this year although gasoline sales will continue to climb.

BEIJING (TheStreet) -- Airline travel and SUV sales are propping up flagging oil demand in China, which according to a new forecast will increase a mere 0.3% year-on-year in 2014 after rising 2.9% last year.

Indeed, the forecast compiled by China's largest investment bank suggests barrel-per-day demand for all refined oil products would decline this year if not for a rising class of consumers who like to fly and drive big vehicles.

"We believe diesel and naphtha's reliance on industrial activities will see their demand continue to fall (in 2014), while gasoline and kerosene's heavy exposure to consumer spending should see their growth remain solid against the backdrop of ongoing adjustments to China's economic structure," CICC analyst Guo Chaohui told TheStreet in an email Monday.

CICC's prediction of a mere 0.3% rise for refined oil demand represents a significant cut from last year's consensus forecast of 2% to 3% growth for 2014, Guo said.

But it's in line with first-quarter 2014 data, which showed demand plunged to 10 million barrels a day from 10.6 million in the fourth quarter of 2013. It was also down from the 10.3 million barrels per day sold in the first quarter of 2013.

Guo said a "slower growth pace" for oil in China "has been verified by the 1Q data."

About 40% of last year's average daily consumption of 10.5 million barrels was used by the industrial sector, including chemical factories. Diesel fuel accounted for 35% of the demand, gasoline 21% and kerosene the rest.

CICC predicted diesel fuel demand would fall this year to 3.45 million barrels a day from last year's 3.49 million barrels, in part because rising coal imports have cut into the need for shipping domestically mined coal by railroad, using diesel locomotives. Moreover, the report said, companies are replacing diesel trucks with models powered by liquefied natural gas, or LNG.

The healthiest oil sector is the gasoline market, which Guo said is growing because consumers are buying bigger vehicles. The government's decision to phase-out subsidies for small, fuel-efficient cars has accelerated the trend since last year, he said.